Versum Materials Inc.
VSM -0.10%
on Friday said its board rejected
Merck
MKKGY 1.60%
KGaA’s unsolicited $48-a-share tender offer but said it would hold talks for a potentially better deal with the German pharmaceutical and specialty chemicals company.

Versum in January agreed to combine with Entegris in a deal that would unite two chemical companies that make critical components for the semiconductor industry, but Merck stepped in last month with a proposal to buy Versum for about $5.2 billion.

Versum on Friday said it met with Merck under a limited waiver from Entegris, and that it will now hold further talks and provide nonpublic information to Merck.

Entegris, based in Billerica, Mass., said it still believes its combination with Versum is in the best interests of shareholders of both companies, adding that the boards of both firms continue to recommend the proposed union.

Under the current merger agreement, Versum would be required to pay a $140 million breakup fee to Entegris if it backs out of the deal.

Shares of Versum, which have consistently traded above $48 since Merck made its initial bid, edged up in afternoon trading Friday. Shares of Entegris rose nearly 2%.